NPR Story

12:07 pm

Wed June 18, 2014

American Airlines To End Most Flights To Venezuela

A man walks next to an American Airlines ticket sale office in Caracas on June 17, 2014. American Airlines announced earlier today that it will cut almost 80 percent of its weekly flights to Venezuela, on account of a USD 750 million debt that the Venezuelan government holds with them. The government of President Nicolas Maduro owes several international airlines USD 4,200 million, which made two of them close down their operations in Venezuela and others to implement deep cutbacks. (LEO RAMIREZ/AFP/Getty Images)

American Airlines is cutting nearly 80 percent of its flights between the U.S. and Venezuela starting in July, because the Venezuelan government owes it $750 million dollars in ticket revenue.

American is the largest foreign airline serving Venezuela, and it’s just the latest carrier to suspend most or all flights to the country.

The carrier is also scrapping all direct flights to Venezuela from New York, Dallas and San Juan, Puerto Rico, and will only fly there from Miami.

Here & Now’s Jeremy Hobson talks to Jason Bellini of the Wall Street Journal about the financial dispute that prompted American and other airlines to reduce service to Venezuela.

Guest

American Airlines has announced that it is cutting nearly 80 percent of its flights between the U.S. and Venezuela starting in July. That's because the Venezuelan government owes it $750 million in ticket revenue. American is the largest foreign airline serving Venezuela and it's just the latest carrier to suspend all or most flights to the country. The Wall Street Journal's Jason Bellini joins us from New York to explain. Jason going...

BELLINI: Yeah, and what's worse is you have to bring your own folding chair along with you. No, I kid. I probably shouldn't joke about this because this is a pretty serious situation as it's really become in Venezuela. Now direct flights on the Caracas-New York and Caracas-Dallas-Fort Worth routs on American Airlines, those are going away. The companies going to run eight flights a week between the Venezuelan capital and Miami. Now, there have been 16 other airlines that have not reached a deal with the government. This is according to the Venezuelan Airline Association and that includes Delta and United as well.

HOBSON: And what's this all about? This has to do with Venezuela's currency control system.

BELLINI: Yeah, that's right. I mean, it's affecting so many areas of Venezuela's economy, causing protests in the streets, violent protests in the streets. Last month - now we're talking about currency controls that have been imposed about a decade ago and that prevents foreign companies, that are operating in the country from converting their ticket revenues in local currency to U.S. dollars without state approval. And that's all very complicated because the system there is very complicated. There are actually three different exchange rates, too complicated to get into, but the bottom line is it makes it more expensive for people to purchase these tickets. And you've got companies that have been waiting for their cash from as far back as 2012.

HOBSON: And I imagine that American is not doing this because they don't want to be serving the Venezuela market. They've obviously been doing that for a long time and they make money on that route. So, are they doing this to try and put pressure on Venezuela? And how significant is it - if not just American but these other airlines as well decide they're not going to fly there, for Venezuela?

BELLINI: Well, it's significant. What's American's motivations are - that I can't speak to but - it sounds like to me like they want their money and they want to put the pressure on to get the money that's owed to them. You know, Air Canada has already suspended service. Lufthansa, Copa Airlines, they've reduced the number of tickets that have been made available in local currency. You know these problems of accessing dollars has forced many companies across the board to scale back, local production and imports and what that's causing there locally, shortages of basic goods. We're not just talking about taking a trip somewhere. We're talking about cooking oil, deodorant, car parts and as my colleague Kayjal Evas (Ph) reports, even coffins are now - there are shortages of coffins believe it or not and this is a country that is wildly plagued by the one of the regions highest murder rates.

HOBSON: And this is just basically because of a shortage of U.S. dollars there?

BELLINI: Well, there's that but there's also the 60 percent annual inflation and the they've got these very cumbersome foreign exchange systems that, like I said, they have three different rates for the dollar. And really what this is about is, you know, under Hugo Chavez things were great in this country because they had the world's largest oil reserves. Mr. Chavez pumped oil revenues into the country's economy, but, you know, in the aftermath that he's gone and now you have a country that imports most of its consumer items and businesses have become unable to charge enough to buy those goods.

HOBSON: Jason Bellini a reporter with the Wall Street Journal, talking with us about the American Airlines decision to cut nearly 80 percent of its flights to Venezuela in a dispute over about $750 million in ticket revenue, being held by the country's government. Jason thanks for joining us.